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Concept
Finance capitalism
Summary
Finance capitalism or financial capitalism is the subordination of processes of production to the accumulation of money profits in a financial system.
Financial capitalism is thus a form of capitalism where the intermediation of saving to investment becomes a dominant function in the economy, with wider implications for the political process and social evolution. The process of developing this kind of economy is called financialization.
Finance capitalism is characterized by a predominance of the pursuit of profit from the purchase and sale of, or investment in, currencies and financial products such as bonds, stocks, futures and other derivatives. It also includes the lending of money at interest; and is seen by Marxist analysts (from whom the term finance capitalism originally derived) as being exploitative by supplying income to non-laborers. Academic defenders of the economic concept of capitalism, such as Eugen von Böhm-Bawerk, see such profits as part of the roundabout process by which it grows and hedges against inevitable risks.
In financial capitalism, financial intermediaries become large concerns, ranging from banks to investment firms. Where deposit banks attract savings and lend out money, while investment banks obtain funds on the interbank market to re-lend for investment purposes, investment firms, by comparison, act on behalf of other concerns, by selling their equities or securities to investors, for investment purposes.
The meaning of the term financial capitalism goes beyond the importance of financial intermediation in the modern capitalist economy. It also encompasses the significant influence of the wealth holders on the political process and the aims of economic policy.
Thomas Palley has argued that the 21st century predominance of finance capital has led to a preference for speculation—Casino Capitalism—over investment for entrepreneurial growth in the global economy.
Rudolf Hilferding is credited with first bringing the term finance capitalism into prominence, with his (1910) study of the links between German trusts, banks, and monopolies before World War I.
Official source
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